A Trustworthy Beast

"The public may regard trusts or combinations with serene
confidence."--ANDREW CARNEGIE, in an interview in N. Y. Times,
Oct. 9.

Artist: William Allen Rogers

ndrew Carnegie, the
multi-millionaire entrepreneur, explains the harmless nature of business
consolidation ("trusts or combinations") to Uncle Sam.
The cartoonist contrasts the magnate's calm demeanor and reassuring
words with the image of a business trust as a snarling, hydra-headed
beast, with demonic tongues and pointed horns. The many heads
represent Carnegie's investments in (clockwise from lower-left) steel,
lumber, salt, sugar, and oil.

Andrew Carnegie was born in
Dunfermline, Scotland, in 1835 into a family of Scottish patriots and
republicans (anti-monarchists). The transition of textile work
from small shops to mechanized factories forced Carnegie's weaver father
into poverty and prompted the family's immigration to the United States
in 1848. In America, his father went to work in a cotton textile
factory, where Carnegie labored as a bobbin-boy. Although his
formal education was limited to four years in Scotland, the youth
frequently used the free, private library of the wealthy James
Anderson. While retaining a romantic view of Scotland, Carnegie's
thorough Americanization and enthusiastic patriotism earned him the
nickname, "the Star-Spangled Scotsman."

His father soon left the
factory to eke out an existence as a door-to-door weaver. Carnegie
also left, working in succession as a steam engine tender, telegraph messenger,
and telegraph operator. His facility for the latter led to his
hiring as the private telegrapher and secretary to Thomas A. Scott, a
Pennsylvania Railroad superintendent, who instructed the young man in
the ways of business management and investment. When Scott was
promoted as the railroad's general superintendent, the 22-year-old
Carnegie replaced him as superintendent of the Western Division.
The young manager used his salary to invest in oil and passenger
railroads.

By 1865, Carnegie had attained
enough wealth from diverse investments to retire from his salaried
position. In 1867, he joined forces with George Pullman to
establish the Pullman Palace Car Company, and became the principal
shareholder of the Pacific & Atlantic Telegraph Company, which he
sold later to Western Union at a substantial profit. By the end of
the next year, he had a net worth of $400,000.

Carnegie understood the
benefits of business consolidation, and began applying the principle
early in his career. In 1864, he established the Cyclops Iron
Company, which the next year bought and merged its chief rival into
Union Mills. To compete with the Bessemer steel process developed
in Britain, in 1873 Carnegie began building the largest Bessemer steel
plant in the United States, located outside Pittsburgh, Pennsylvania.
The onset of an economic depression
that fall allowed him to
attract skilled workers at low wages and finish construction ahead of
schedule.

While many American businesses
in the late-nineteenth century were adopting managerial hierarchies and
outside stockholders, Carnegie used simple partnerships with men who
were active managers and owned part interest in the firms. With no
oversight from outside stockholders or the necessity of paying
dividends, Carnegie was able to directly manage his companies and reinvest his
enormous profits. He removed ineffective partners, and rewarded
successful ones with larger ownership shares. To enhance
production profitability, he expanded his steel operations vertically by
buying coke factories, finishing plants, and other businesses in the
chain of steel production. He also sought technological
innovations for his mills and factories.

In the period from 1888 to
1898, Carnegie Steel's production tripled and the company's capital more
than doubled, from $20 to $45 million. By 1900, Carnegie Steel
accounted for one-third of steel production in the United States, and
was a greater amount than that in all of Britain. The next year,
Carnegie sold his steel empire to J. P. Morgan for $480 million.
It became the first billion-dollar corporation in the world, U.S. Steel.

For three years in the early
1880s, Carnegie published seven British newspapers, which promoted the
establishment of a British republic and the disestablishment of the
Anglican Church. In his best-selling book, Triumphant Democracy
(1886), Carnegie argued that political systems determine economic output
and, therefore, the politically free system of democracy produces
economic prosperity. That same year, he authored two articles in Forum
magazine, supporting labor's right to strike and opposing
strikebreaking. In 1892, however, he ordered the union broken at
his steel plant in Homestead, Pennsylvania. The resulting
bloody clash (which he did not anticipate) became a symbol of harsh
management tactics. Carnegie, who was vacationing in Scotland,
blamed his partner, Henry Clay Frick, for using Pinkerton guards and
strikebreakers.

Over the years, Carnegie wrote
eight books and 63 articles. In 1889, he published an essay in two
issues of North American Review, reprinted in Britain as the
"Gospel of Wealth." In it, he proposed that the
accumulation of massive wealth was justified if the possessor used it to
benefit society, rather then leaving it to his family or distributing it
in individual charity to the "submerged tenth" of the
population. The money should go to institutions (in descending
order): universities and other educational or research facilities;
free public libraries; medical education and hospitals; public parks;
concert halls; public swimming baths; and churches. The article aroused much debate, and with clergy
particularly critical that churches were deemed less worthy than
swimming baths.

Upon his retirement in 1901,
Carnegie put his philanthropic philosophy more fully into action.
He established nearly 3000 libraries, almost 2000 of them in the United
States, most of the rest in Britain and Canada, and one as far away as
Fiji. He funded retirement pensions for steelworkers and
teachers. In 1902, the Carnegie Institution, dedicated to
scientific research, was opened in Washington, D. C. He donated
nearly 8000 pipe organs to churches. His hometown of Dunfermline,
Scotland, received numerous gifts in the form of buildings and
endowments, and tuition-free scholarships were established at four
Scottish universities. At Pittsburgh, the home of his former steel
empire, Carnegie founded the Carnegie Institute of Technology (now,
Carnegie-Mellon), a
library, art gallery, and concert hall. In all, he donated over
$300 million during his lifetime.

As an anti-imperialist and
pacifist, Carnegie established four foundations dedicated to
international peace: the Carnegie Endowment for International
Peace; the Carnegie Hero Fund (rewarding civilian life-savers); the
Church Peace Union; and the Simplified Spelling Board (assuming that
phonetic English could become the universal language and thereby promote
international understanding and harmony). His "Temples of
Peace" include the Hague Peace Palace in the Netherlands (home to
the World Court), the Pan American Union building in Washington, D. C.,
and the Central American Court of Justice in Costa Rica. In 1911,
he established the Carnegie Corporation to distribute most of the
remainder of his wealth: $125 million. He was devastated by
the outbreak of World War I in 1914, and died five years later at his
summer home in Lenox, Massachusetts.